SINGAPORE: Oil prices remained under pressure in Asia on Friday after a huge jump in US crude inventories reinforced projections that a supply glut will persist well into next year.
US benchmark West Texas Intermediate (WTI) for delivery in December was down 22 cents to $41.53 and Brent crude for December was trading two cents higher at $44.08 a barrel at around 7:20 a.m. local time.
Prices were hammered Thursday after the US Department of Energy reported that commercial crude inventories in the world’s top oil consumer grew by 4.2 million barrels last week, far higher than analyst expectations of an increase of 1.3 million barrels.
WTI sank 2.7 percent and Brent fell 3.8 percent after the report, which also showed US crude oil production continued to ramp higher.
Global oil demand growth has not been fast enough to soak up the excess in supplies and analysts say a rebalancing of the supply-demand situation is needed for a sustained uptick in prices.
Oil prices have plunged by more than half from peaks of over $100 a barrel in mid-2014.
“Although global oil demand growth has been exceptionally strong year-to-date, the overall pace of supply side adjustment has been too slow to end a sustained increase in global inventories that we expect to persist through most of 2016,” British bank Barclays said.
It said in a market commentary that US offshore production in the Gulf of Mexico reached its highest level since early 2010 in August and is expected to remain strong although at a slower pace into 2016 “as several more new fields begin to produce.”
Members of the Organization of the Petroleum Exporting Countries (OPEC) have also kept production high in an aggressive bid to retain market share.
OPEC’s collective production has stabilized at around 31.5 million barrels per day in recent months, Barclays said, but this is still more than its output ceiling of 30 million barrels a day.